SSgA says global ETF investors favour large cap and financials

Commentary on April 2014 global exchange-traded fund (ETF)  flows, by Amanda Skelly, Head of SPDR ETFs, Australia:

The Australian ETF industry continues to attract record cash flows into a variety of strategies with the category on track to break the $15bn AUM level by year end. Globally, the ETF industry is closing in on US$2.5 trillion in AUM with some interesting investment trends playing out.

Global ETF flows for the first four months of 2014 reflect the rollercoaster of investor emotions that started with a huge sell-off in large cap equities and emerging equities, and April ended with strong positive flows in both of these areas. April ETF flows show that global investors are now favouring large cap over small, and emerging markets are back on the radar with around US$8bn in positive emerging market flows for the month. This comes despite continued underperformance of emerging markets when compared to developed markets.

On sector perspective, while investor interest has been an unusual mix of defensive, mid and late sector cycles, most of the money has been put to work in the financials sector, one that does better in an improving economic environment. We’ve also seen money moving into health care, a sector usually thought of as defensive however, within this sector bio-tech industry has benefited from sustained growth. Continued questions about the health of consumers has seen investors pull $3.8b from consumer goods ETFs so far this year.

Taking a look at where ETF flow has been moving, combined with positive fundamentals, we see three sectors which investors are likely to take advantage of – Energy, Financials and Technology. All of them have elements of early recovery and, particularly in the case of energy, late cycle recovery.

For Australian based ETF investors, these global sectors can be accessed from a range of broad based international equity ETFs – and it’s not surprising that so far this year, these are the ETFs that have attracted the highest amount of investor interest.

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